Profiting From the
Work of Others: Why Weakening Prescription Drug Patent Protection
is Bad Public Policy

by Eric Peters

A cornerstone of the free market -- and
the individual initiative that keeps it running -- is the idea
that any new invention or product will be protected by law against
copycats who didn't do the work or invent anything, but who nonetheless
hope to cash in on someone else's "sweat equity." This
is the fundamental issue in the current debate over the so-called
"Greater Access to Affordable Pharmaceuticals Act" --
peddled more informally under the rubric of Schumer-McCain, in
reference to its primary congressional sponsors.

If it passes the House (the Senate version
of the legislation, S.812, has already been approved), Schumer-McCain
would further water down already abbreviated patent protections
on newly developed prescription drugs -- allowing generic drug
makers to elbow in just a few short years after a new drug finally
comes on the market and lawfully sell drugs they invested little,
if any, of their own time and money developing and testing.

This is more than unfair to the pharmaceutical
companies and the thousands of individuals who work for them --
it is terribly shortsighted public policy.

Schumer-McCain is being sold as a means
of lowering the cost of prescription drugs -- an emotionally compelling
argument, especially for the elderly. And the legislation may,
indeed, lower the cost of some prescription drugs -- in the short
term -- for those already invented and on the market. But what
about future drugs not yet invented? Will pharmaceutical companies
invest the money and the time -- on average $800 million and 14
years -- developing life-saving new drugs if they know beforehand
that they may not be able to recoup their costs, and that generic-brand
competitors, who have not had to tap their capital and human resources
to develop those new drugs, may nonetheless simply grab the recipe
(so to speak) and then produce and sell these new medicines for
a tidy profit?

It's not likely.

As Heritage Foundation Health Care Policy
Analyst Nina Owcharenko argues in a recent analysis of the matter,
"The potential loss of revenue and smaller profit margins
would lead to less reinvestment in the intensive research and
development that creates new and improved drug treatments current
drug supplies would tighten, and future breakthrough medicines
and treatments might either slow or, in some case, never materialize."1

How would that benefit seniors -- or anyone
else, for that matter?

Pharmaceutical companies are like any other business; they must
make a profit in order to remain in business. And it's hard to
remain in business when your competitive edge -- new products
-- may be effectively taken from you by other businesses with
political pull.

Dr. Merrill Matthews of the Institute
for Policy Innovation notes that the initial research into a new
medicine, testing protocols, and the subsequent, often arduous
approval process by the FDA takes on average 8 to twelve years
-- a period that amounts to more than half the effective "lifetime"
of existing patent protections, which last for just 20 years.
At present, pharmaceutical companies have on average just 8 to
10 years to recoup their often staggering investment before other
companies may lawfully offer generic versions of the same drug.2 The
Schumer-McCain legislation proposes, in effect, to further close
the already minimal "window" during which a new drug's
inventor can recover the cost of developing that drug.

Certainly, cutting edge prescription drugs
are often expensive -- for good reason. Nevertheless, if pharmaceutical
companies that develop new drugs are not allowed to make money
from the sale of the drugs they invent, where do "reform"
advocates imagine the funds will be obtained to finance new research
into tomorrow's drugs? The scientists who spend years working
on these things expect to be paid; facilities and equipment cost
money. Making sure a new drug is both safe and effective does
not come cheap. But which is the better option: encouraging innovation
into new life-saving treatments by protecting the hard work and
investment of those who make them possible, or enacting laws that
would make any sensible person or business think twice about investing
years and millions of dollars into a product that might never
reach the market in the first place, and which, if it does, could
then be effectively expropriated by a competitor?

The desire of "reform" advocates
to "help" the elderly is understandable, even laudatory,
but "concern" does not alter economic reality. Waving
the swagger stick of government around will not suspend marketplace
realities; it will only make matters worse. There are ways of
helping older folks and others who need help with the high cost
of prescription drugs without ham-fisted interference by government
in the marketplace.

The idea that a public good is being advanced
in the case of Schumer-McCain doesn't hold up when one reflects
upon the impact that weakening patent protections and intellectual
property rights would have on the development of future drugs
-- and that the generic competitors demanding this "reform"
are, after all, not charitable enterprises. What makes these for-profit
businesses that are clamoring for a government-mandated competitive
advantage any less rapacious than the supposedly "greedy"
pharmaceutical companies that developed the new medicines in the
first place?

Wheeling out "the elderly" and
"those on fixed incomes" in a demagogic attempt to tug
on people's emotions (but not appeal to their reason) doesn't
alter the nature of the shabby transaction that is Schumer-McCain
-- or the stifling effect it will have down the road if passed
into law.

Unless we have decided to throw away the
idea that innovation should be rewarded, we must resist the emotional
siren song of weakened drug patents. This ill-conceived notion
won't help today's elderly for very long, if at all -- and it
may cost the elderly and others who depend on lifesaving new breakthroughs
a lot more than money in the years to come.

# # #

Eric Peters is a senior fellow
with The National Center for Public Policy Research and an editorial
writer with The Washington Times. He can be reached at [email protected].